Trump’s Proposed Tax Breaks Promise Sweeping Reductions for Workers, Families, and Businesses

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House Republicans have released a massive proposal centered on tax breaks, answering President Donald Trump’s call for a broad rewrite of federal tax policy. The legislation, named “THE ONE, BIG, BEAUTIFUL BILL,” promises sweeping reductions in taxation for workers, families, and businesses. With a preliminary cost nearing $5 trillion and additional provisions still in flux, the proposal immediately reignited debate on how the federal government sets its economic priorities.

A Closer Look at the Tax Breaks

At the heart of the bill are new tax breaks aimed at middle- and working-class Americans. The most talked-about provisions include eliminating taxes on tips, overtime pay, and car loan interest. These items were central to Trump’s 2024 campaign, and their inclusion marks a clear shift toward income-specific relief.

The plan proposes increasing the standard deduction to $32,000 per household and raising the child tax credit to $2,500 for the next four years. A new provision would also deny that credit to undocumented parents, even if their children are U.S. citizens. Seniors earning below $150,000 per couple would receive a $4,000 deduction for Social Security benefits.

Workers in tipped industries would gain a full deduction on gratuity income, while those earning overtime wages would no longer be taxed on those additional hours. The bill stipulates that these deductions would only apply through 2028 and would include strict eligibility criteria based on income and job classification.

Auto loan interest could also become deductible up to $10,000 per year, but only for vehicles assembled in the United States. The deduction phases out for individuals earning over $100,000 and couples over $200,000.

The estate tax exemption would increase from $14 million to $15 million per person and continue rising with inflation. The plan also makes permanent a deduction for certain pass-through business income, raising it from 20% to 23%.

What Didn’t Make It

Notably absent is the repeal of the carried interest loophole, a long-standing goal for tax reformers. Trump had signaled openness to closing it, but the idea failed to gain traction. Proposals to increase tax rates on the wealthiest individuals were also excluded. Income caps for several deductions further limited the benefits for high earners.

While the bill proposes expanding the cap on state and local tax (SALT) deductions to $30,000 for couples, Republicans from high-tax states like New York and California said the increase falls short. Some demanded a cap closer to $60,000, calling the current proposal “insulting.”

Another campaign promise that didn’t materialize in full was Trump’s pledge to eliminate taxes on Social Security income entirely. Instead, the bill limits relief to a fixed deduction, likely due to budget reconciliation constraints.

How Will Trump’s Tax Breaks Cover the Cost?

To offset the estimated $5 trillion in revenue losses, Republicans have proposed sharp cuts in spending. Medicaid faces at least $880 billion in reductions, including new work requirements and biannual eligibility checks. The Congressional Budget Office estimates that these changes would leave 8.6 million people without coverage.

The bill also introduces significant reforms to the Supplemental Nutrition Assistance Program (SNAP), requiring recipients up to age 64 to meet new work mandates. Some parents of school-age children would now be subject to work conditions, while states would assume more financial responsibility for the program.

Federal student loan reforms would cap aid and eliminate income-based repayment options. Green energy tax credits from the Inflation Reduction Act would be rolled back, along with funding for climate-focused transportation projects.

Private universities and foundations face tax hikes, with rates rising as high as 21% on endowments and 10% on some foundation assets. New MAGA savings accounts for children under 8 would be introduced with an initial $1,000 government credit, capped annual contributions, and age-based withdrawal restrictions.

The President’s Debt Ceiling Strategy

The bill also includes Trump’s request for a $4 trillion debt ceiling increase. Rather than negotiate a standalone agreement with Democrats, the former president is bundling the debt limit hike with his tax legislation. Treasury officials have warned that Congress must act before the August recess to avoid default. Trump has framed the bill as the only viable path forward.

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